Best Discretionary stocks to favor technically for bounce into 2024

Technically the broad-based participation higher in multiple sectors in the last month is certainly a positive heading into 2024. While near-term risk/reward doesn’t seem favorable for those with timeframes less than two to three months, the recent overbought readings have not signaled any evidence of giving way. I’ll be watching for evidence of any hint of trend reversal in the days ahead. If this fails to materialize until January, then a larger than normal correction likely would occur into February of 2024.

As discussed in recent days, the US Equity and Treasury market rallies have gotten extended, and now the Equity rally is nearing an important level with regards to QQQ, SPX as well as IWM. Despite some slowdown in the last week with regards to several of the highest percentage SPX names like AAPL, markets have shown no evidence of any deterioration of any kind.

Weekly SPX chart shows prices now within four points of a record weekly high close (as of midday Tuesday 12/19), while price remains roughly 50 points shy of its all-time intra- week peak of 4818.62. While I expect that this level should hold this week, there hasn’t been much to comment on regarding pullbacks of any sort in recent days.

Tuesday brought about above-average strength in the Materials sector, along with Discretionary, Healthcare and REITS in what proved to be a broad-based rally for the market. The more actionable movement seemed to happen within the Pharmaceutical space on Tuesday along with the Discretionary stocks (the latter which will be discussed later in the report).

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